Over the past 30 years, the airline industry has grown exponentially because of escalating global travel demand. According to the 2015 Global Market Forecast Report by Airbus, passenger air traffic has doubled every 15 years since the early eighties, and is expected to grow at an average annual rate of 4.6% over the next 20 years. There is massive economic promise in the Asia-Pacific region given the forecast of a 20-year growth rate at 5.7%. The region as a whole will account for 36% of the world’s air traffic, increasing from 29% in 2014. Given its immense growth potential and budding opportunities, many world-class aerospace companies are looking to expand and locate their business in the Asia-Pacific region.

Thailand is set to grow and benefit from the rising trends in global aviation thanks to its readily available skilled human resources, its geographical advantage, and strong government support. The country is on its way to becoming Asia’s premier aviation hub, and a full-service leader in the aerospace industry.

Cascading Expansion in Thailand’s Domestic Market

Thailand’s aviation growth is seeing rapid expansion, as the center of gravity for global aviation shifts to the Asia-Pacific region. According to the Air Transport Information Division of AOT, total air traffic in Thailand increased by 21% in 2015, with an increase in aircraft movement by 17% and passenger movement by 21% from 2014. In value terms, this generates an increase of about THB 6 billion (USD 167 million) of revenue to the country.

According to an interview with AOT, the increase in air traffic was driven by the expansion of Thailand’s tourism industry and low cost airlines. In 2015, a total of 23 million tourists traveled to Thailand by air, which demonstrates an increase of 21%, up from 19 million tourists in 2014. Low cost airlines in Thailand contributed around 30% of the market share, with low-cost aircraft movement increasing by 29% and passenger movement increasing by 34% from 2014.

Largely Untapped MRO Sector

The MRO business in Thailand still has great room for growth. According to the Office of Transport and Traffic Policy and Planning (OTP), Ministry of Transport, total MRO expenses are estimated to be about THB 5,990 billion (USD 167 billion) during the next decade (2015-2024) in the Asia Pacific region. About 6.3% of that expenditure will occur in Thailand, which will generate about THB 28 billion (USD 772 million) in MRO income in 2015, and up to THB 380 billion (USD 10.6 billion) forecasted over a period of ten years.

Aerospace Industrial Estate Development Plan (2016-2045)

The government’s recognition of the opportunities that lie in Thailand’s aerospace sector has led to the implementation of the Aerospace Industrial Estate Development Plan (2016-2045) at U-Tapao-Pattaya International Airport. Currently being executed in three phases, the Aerospace Industrial Estate will utilize a total of 500 rais (80 hectares) of land, with 300 rais (48 hectares) dedicated to Original Equipment Manufacturers (OEMs) and 200 rais (32 hectares) dedicated to the MRO sector. At present, the focus is on Tier 3 component manufacturing and Tier 4 composite manufacturing for OEMs. As for MRO, the present focus is on servicing airframes, engines, and their components; the top five components expected to bring in the most capital in Thailand are (1) Landing gear wheels and brakes, (2) Auxiliary Power Units (APUs), (3) In-flight entertainment (IFE) components, (4) Engine fuel and control, and (5) Landing gear.

Thailand Offers Multiple Advantages

Aside of the tax and non-tax incentives provided by Thailand’s Board of Investment, foreign investors can also benefit from many of Thailand’s strengths in the aviation industry.

Firstly, Thailand has abundant land availability for the expansion of its booming aerospace industry.

Secondly, Thailand offers skilled labor at competitive costs compared to other Asia Pacific countries. Given the proliferation of institutions in Thailand that offer degrees in Aerospace Engineering, such as the Civil Aviation Training Center (CATC) and over 60 private and public universities, there is plenty of highly skilled labor available in Thailand.

Thirdly, Thailand’s excellent location in the ASEAN Economic Community (AEC) and the Thai airline industry’s solid connections to corresponding airline industries in ASEAN, presents investors with manifold opportunities in the MRO business.

Last but not least, Thailand has a well-established aerospace industry base and excellent linkage industries such as Automotive and Electronics. Some companies that have invested in Thailand include Airbus, Boeing, Weston Aviation, Saab Thailand, Chromalloy, and Triumph Aviation Services. All in all, forward-thinking investors have in Thailand a ready base to take advantage of the explosive growth happening in Asia-Pacific’s aviation industry, and can expect to reap great economic benefits.

Thailand’s Aviation and Aerospace Industry Receives Strong Government Support

With its central position in the heart of Asia, Thailand is a major player in the region’s multi-billion-dollar aircraft manufacturing and maintenance industries, and possesses the advanced 21st century infrastructure needed to handle the increasing demands of the region's aerospace sector. The Thai Government has identified ten industries which it considers its ‘New Engines of Growth’ (New S-Curves) to drive the economy for the future. The aviation industry, is part of the new S-Curve and the government is implementing extensive economic-policy reforms and offering attractive incentives, and investment promotion packages to attract investments in the industry.

BOI Incentives Promote Growth

As one of Thailand’s future industries, the aviation industry is expected to serve as a new growth cradle, boosting the country’s economic development. Under the new scheme introduced by Thailand’s Board of Investment (BOI), aerospace related activities are eligible for additional incentives for Super Clusters under the

BOI’s cluster policy if they meet certain obligatory conditions. Firstly, investors wishing to receive additional incentives need to make sure that they are based in one of 14 clusters.

The 14 targeted locations are Bangkok, Samut Prakan, Nakhon Pathom, Pathum Thani, Chachoengsao, Chonburi, Rayong, Chiang Rai, Phitsanulok, Nakhon Sawan, Lopburi, Nakhon Ratchasima, Surat Thani, and Songkhla. Other obligatory conditions that investors must meet include cooperation with academic or research institutions or the Center of Excellence in the cluster area. Examples of cooperation include participating in Talent Mobility or Work-Integrated Learning programs and others. The goal here is to develop human resources and upgrade technology levels. Investors are also required to apply for investment promotion within 2016 and begin operations within 2017 to accelerate investment.

Investors meeting all these conditions are eligible to be granted Super Cluster incentives such as an 8-year corporate income tax exemption and an additional five-year reduction of 50%. Personal income tax exemption will be granted for renowned specialists (both Thai and foreigners) who work in the specified areas. For future industries of significant importance, the Ministry of Finance will consider granting 10-15 years of corporate income tax exemption. Nontax incentives include permission for foreigners to own land to implement promoted activities. The Government will also consider granting permanent residence to leading specialists.

Some examples of activities that are eligible to receive incentives are the repair of aircraft or aircraft parts, the manufacture of aircraft parts, including critical parts such as engines and engine parts, propellers etc., and appliances such as flight recorders, radar etc., and other equipment. Activities that need to be approved by related agencies such as the Geo-informatics and Space Technology Development Agency include the manufacture of aerospace devices and equipment, such as those related to rockets, spacecraft, space vehicles, propulsion units and auxiliary equipment, etc. and Aerospace Operating Systems such as search, detection, navigation, guidance, aeronautical and nautical systems and instruments. With these measures, the BOI aims to promote Thailand's attractiveness as a leading aerospace hub in Southeast Asia.